Please note
2020 Third Quarter Highlights: Best-in-Class Balance Sheet
- Quarterly average production was 44,305 barrels of oil equivalent per day ("boe/d") (consisting of 4,626 barrels per day ("bbls/d") of light crude oil and medium crude oil, 38,309 bbls/d of heavy crude oil and 8,220 thousand cubic feet per day ("mcf/d') of conventional natural gas (97% crude oil)), an increase of approximately 11% on a per basic share basis over the previous quarter ended
June 30, 2020 . Production decreased 13% on a per basic share basis over the prior year comparative period as a result of the Company reducing production volumes in the low oil price environment; - Recognized net income of
$27.6 million ($0.20 (or CAD$0.27 )(1) per share basic) compared to net income of$19.3 million ($0.14 (or CAD$0.19 )(1) per share basic) in the previous quarter endedJune 30, 2020 and net income of$57.3 million ($0.40 (or CAD$0.53 )(1) per share basic) in the comparative quarter of 2019; - Generated an operating netback(4) of
$23.10 per barrel of oil equivalent ("boe") and funds flow provided by operations ("FFO")(4) of$19.53 per boe from an average Brent price of$43.34 per barrel ("bbl"); - FFO of
$79.4 million ($0.57 (or CAD$0.76 )(1) per share basic) as compared to$142.7 million ($0.99 (or CAD$1.31 )(1) per share basic) for the prior year comparative period. FFO was reduced in the current quarter due to lower sales volumes and lower Brent prices; - Capital expenditures were
$17.8 million in the period; - Utilized a portion of free funds flow(4) of
$61.6 million to purchase 2,305,000 of the Company's common shares for a total cost of$30.8 million (average price ofCAD$16.45 /share) pursuant to the Company's normal course issuer bid program; - Working capital was
$370.7 million (CAD$3.61 per share basic)(2) atSeptember 30, 2020 compared to$339.3 million atJune 30, 2020 and$279.9 million atSeptember 30, 2019 . The Company has an undrawn syndicated bank credit facility of$200.0 million ; and - Participated in drilling 2 gross (1.55 net) wells(3) in
Colombia resulting in 2 oil wells, for a success rate of 100% compared to drilling 9 gross (5.30 net) wells in the comparative period of 2019.
(1)
(2) Using USD-CAD Bank of Canada
(3) Oil wells: Block LLA-34: Tigui-23; Block Cabrestero: Bacano Oeste-4.
(4) See "Non-GAAP Terms" for further discussion.
Three Months Ended | Nine months ended | |||||||
2020 | 2019 | 2020 | 2020 | |||||
Operational | ||||||||
Average daily production | ||||||||
Light Crude and Medium Crude Oil (bbl/d) | 4,626 | 8,135 | 4,186 | 5,814 | ||||
Heavy Crude Oil (bbl/d) | 38,309 | 43,862 | 35,478 | 39,488 | ||||
Crude oil (bbl/d) | 42,935 | 51,997 | 39,664 | 45,302 | ||||
8,220 | 6,288 | 7,164 | 7,050 | |||||
Oil & Gas (boe/d)(1) | 44,305 | 53,045 | 40,858 | 46,477 | ||||
Average daily sales of produced oil & natural gas | ||||||||
Oil (bbl/d) | 42,802 | 51,353 | 41,583 | 45,082 | ||||
Gas (Mcf/d) | 8,220 | 6,288 | 7,164 | 7,050 | ||||
Oil & Gas (boe/d) | 44,172 | 52,401 | 42,777 | 46,257 | ||||
Oil inventory - end of period (bbls) | 88,000 | 175,813 | 75,732 | 88,000 | ||||
Operating netback ($/boe)(2) | ||||||||
Reference price - Brent ($/bbl) | 43.34 | 62.03 | 33.39 | 42.65 | ||||
Oil & natural gas revenue (excluding hedging) | 33.88 | 53.59 | 19.25 | 31.07 | ||||
Royalties | (2.97 | ) | (6.72 | ) | (1.99 | ) | (3.31 | ) |
Net revenue | 30.91 | 46.87 | 17.26 | 27.76 | ||||
Production expense | (5.00 | ) | (6.15 | ) | (4.98 | ) | (5.11 | ) |
Transportation expense | (2.81 | ) | (4.51 | ) | (2.33 | ) | (3.12 | ) |
Operating netback ($/boe)(2) | 23.10 | 36.21 | 9.95 | 19.53 | ||||
Funds flow provided by operations ($/boe)(2) | 19.53 | 29.61 | 9.96 | 17.00 | ||||
Financial (USD$000s except per share amounts) | ||||||||
Oil and natural gas revenue | 146,231 | 275,693 | 80,407 | 420,256 | ||||
Net income (loss) | 27,619 | 57,257 | 19,290 | 43,130 | ||||
Per share - basic | 0.20 | 0.40 | 0.14 | 0.31 | ||||
Funds flow provided by operations(2) | 79,384 | 142,733 | 38,777 | 215,474 | ||||
Per share - basic | 0.57 | 0.99 | 0.28 | 1.54 | ||||
Capital expenditures | 17,756 | 48,600 | 5,310 | 94,332 | ||||
Free funds flow(2) | 61,628 | 94,133 | 33,467 | 121,142 | ||||
Total assets | 1,548,484 | 1,593,802 | 1,533,377 | 1,548,484 | ||||
Working capital surplus | 370,722 | 279,949 | 339,310 | 370,722 | ||||
Bank debt(3) | — | — | — | — | ||||
Cash | 353,257 | 350,210 | 334,389 | 353,257 | ||||
Outstanding shares (end of period) (000s) | ||||||||
Basic | 137,037 | 143,304 | 139,011 | 137,037 | ||||
Weighted average basic | 138,303 | 144,081 | 139,556 | 139,882 | ||||
Diluted(4) | 140,820 | 148,453 | 143,125 | 140,820 |
(1) Reference to crude oil or natural gas production in the above table and elsewhere in this press release refer to the light and medium crude oil and heavy crude oil and conventional natural gas, respectively, product types as defined in National Instrument 51-101 - Standards of Disclosure for Oil and Gas Activities.
(2) The table above contains Non-GAAP measures. See “Non-GAAP Terms” for further discussion.
(3) Borrowing limit of
(4) Diluted shares as stated include the effects of common shares and in-the-money stock options outstanding at the period-end. The
Q4 2020 Corporate Outlook
Production
- Q4 2020 range of 45,500-47,500 boe/d, contingent on safely resuming development drilling programs and community access.
Capital Expenditures
- Q4 2020 capital expenditures are estimated at approximately
$35-45 million .
Operational Update
- Fortuna: (WI Parex 100%) Currently drilling the horizontal exploration well Cayena-1.
Parex has drilled a pilot well to 8,560 feet in order to log multiple formations and is currently drilling horizontally in the shallower Galembo Formation. - Aguas Blancas: (WI Parex 50%) Completed previously drilled exploration wells AB-11 and AB-24. The test rates of the exploration wells did not meet minimum thresholds to warrant development of the Southern Aguas Blancas area at current oil pricing. Wells are temporarily suspended and under evaluation.
Share Buy-Back
To date, the Company has repurchased for cancellation 9,991,500 common shares, under the normal course issuer bid that commenced on
2021 Corporate Guidance
As per the Company's normal annual disclosure practices, provided below is
2020 Estimate | 2021 Guidance | |||
Brent crude average price | ||||
Production (average for period) | 46,000-46,500 boe/d | 47,000-49,000 boe/d | ||
Total capital expenditures(1) | ||||
Funds flow provided by Operations (FFO) | ||||
Free funds flow (FFO mid-point less Total Capital Expenditures mid-point) | ||||
Share buy-back program(2) | ||||
Outstanding shares (end of period)(2) | 131 million | 118-120 million | ||
Production per share growth | -7 % | 14 % | ||
Estimated working capital (end of period) | ||||
Bank debt outstanding (end of period) | nil | nil |
(1) Q4 2020 and 2021 work program is dependent on ensuring the health and safety of staff and the communities where the Company operates, therefore, planned capital expenditures may only be partially completed.
(2) It is expected that
The planned 2021 capital expenditures are split between maintenance, development/appraisal and exploration/new growth programs. The mid-point of the 2021 production guidance reflects year-over-year production growth of approximately 4% as compared to 2020 and does not include potential additional production volumes resulting from the 7-9 wells included in the exploration program.
Under this guidance scenario, at forecast Brent pricing levels of
The Company's 2021 priority remains the health and safety of its employees, partners and the communities where we operate.
2021 Netback Sensitivity Estimates
Brent crude price ($/bbl) | $40 | $45 | $50 | ||||||
Operating Netback ($/boe) | |||||||||
Effective tax rate (%)(1) | 5 % | 8 % | 12 % | ||||||
FFO Netback ($/boe)(2) |
(1) Effective tax rate is the expected current tax effective rate on funds flow from operations.
(2) Assumes Brent/Vasconia crude differential less than
President Parex Colombia - Senior Leadership Update
After more than 40 years in the energy industry, including nearly 10 years with
Q3 2020 Results Conference Call & Audio Webcast
Toll-free dial-in number ( | 1-866-696-5910 |
International dial-in number: | Click to access the dial-in number of your location |
Passcode: | 4004257# |
Webcast: | https://bell.media-server.com/mmc/p/epgmyns9 |
This news release does not constitute an offer to sell securities, nor is it a solicitation of an offer to buy securities, in any jurisdiction.
For more information, please contact:
Senior Vice President, Capital Markets & Corporate Planning
Phone: (403) 517-1733
Investor.relations@parexresources.com
NOT FOR DISTRIBUTION OF FOR DISSEMINATION IN
Non-GAAP Terms
The Company discloses several financial measures ("non-GAAP Measures") herein that do not have any standardized meaning prescribed under International Financial Reporting Standards ("IFRS"). These financial measures include operating netback per boe, FFO netback, FFO per share and free funds flow. Management uses these non-GAAP measures for its own performance measurement and to provide shareholders and investors with additional measurements of the Company’s efficiency and its ability to fund a portion of its future capital expenditures.
The Company considers operating netback per boe to be a key measure as it demonstrates
- Oil and natural gas sales per boe is determined by sales revenue excluding risk management contracts divided by total equivalent sales volume including purchased oil volume;
- Royalties per boe is determined by dividing royalty expense by the total equivalent sales volume and excludes purchased oil volumes;
- Production expense per boe is determined by dividing production expense by total equivalent sales volume and excludes purchased oil volumes; and
- Transportation expense per boe is determined by dividing transportation expense by the total equivalent sales volumes including purchased oil volumes.
Funds flow provided by operations is a non-GAAP measure that includes all cash generated (used in) from operating activities and is calculated before changes in non-cash working capital. In Q2 2019, the Company changed how it presents FFO to present a more comparable basis to industry presentation.
FFO netback, is a non-GAAP measure that includes all cash generated (used in) from operating activities and is calculated before changes in non-cash working capital, divided by produced oil and natural gas sales volumes.
FFO per share is determined by FFO divided by basic shares outstanding.
Free funds flow is determined by FFO mid-point less capital expenditures mid-point.
Shareholders and investors should be cautioned that these measures should not be construed as an alternative to net income or other measures of financial performance as determined in accordance with IFRS.
Oil & Gas Matters Advisory
The term "Boe" means a barrel of oil equivalent on the basis of 6 thousand cubic feet ("Mcf") of natural gas to 1 bbl. Boe may be misleading, particularly if used in isolation. A boe conversion ratio of 6 Mcf: 1 Bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. Given the value ratio based on the current price of crude oil as compared to natural gas is significantly different from the energy equivalency of 6 Mcf: 1Bbl, utilizing a conversion ratio at 6 Mcf: 1 Bbl may be misleading as an indication of value.
This press release contains a number of oil and gas metrics, including operating netbacks and FFO netbacks. These oil and gas metrics have been prepared by management and do not have standardized meanings or standard methods of calculation and therefore such measures may not be comparable to similar measures used by other companies and should not be used to make comparisons. Such metrics have been included herein to provide readers with additional measures to evaluate the Company's performance; however, such measures are not reliable indicators of the future performance of the Company and future performance may not compare to the performance in previous periods and therefore such metrics should not be unduly relied upon. Management uses these oil and gas metrics for its own performance measurements and to provide security holders with measures to compare the Company's operations over time. Readers are cautioned that the information provided by these metrics, or that can be derived from the metrics presented in this news release, should not be relied upon for investment or other purposes.
Advisory on Forward Looking Statements
Certain information regarding
In particular, forward-looking statements contained in this document include, but are not limited to, statements with respect to the Company’s focus, plans, priorities and strategies; 2020 estimated and 2021 guidance for Brent crude average price, average production, total capital expenditures, FFO, free funds flow, amount spent on the Company's share buy-back program, outstanding shares at end of the applicable period, production per share growth, estimated working capital at end of applicable period, debt outstanding at end of the applicable period and assumptions underlying such estimates and guidance; allocation of 2021 planned capital expenditures; year-over-year growth of approximately 4% in 2021; expectation that Parex’ will generate free funds flow above planned capital expenditures in 2021; expectation that
These forward-looking statements are subject to numerous risks and uncertainties, including but not limited to, the impact of general economic conditions in
Although the forward-looking statements contained in this document are based upon assumptions which Management believes to be reasonable, the Company cannot assure investors that actual results will be consistent with these forward-looking statements. With respect to forward-looking statements contained in this document,
Management has included the above summary of assumptions and risks related to forward-looking information provided in this document in order to provide shareholders with a more complete perspective on
This press release contains future-oriented financial information and financial outlook information (collectively ("FOFI") about the Corporation's prospective capital expenditures and working capital. The FOFI has been prepared by management to provide an outlook of the Company's financial results and activities and may not be appropriate for other purposes. The FOFI has been prepared based on a number of assumptions including the assumptions discussed in this press release. The actual results of operations of the Company and the resulting financial results may vary from the amounts set forth herein, and such variations may be material. The Company and management believe that the FOFI has been prepared on a reasonable basis, reflecting management’s best estimates and judgments. FOFI contained in this press release was made as of the date of this press release and
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